Gulf Coast casinos get second chance - Wednesday 12th of October 2005

LOS ANGELES (Reuters) - Hurricane Katrinas destruction of the Mississippi Gulf Coast may lead to a bigger and stronger gambling industry as casinos abandon barges built as local playgrounds and focus on resorts aiming to attract a national audience.

Katrina devastated the Gulf Coast region destroying or damaging about 90 percent of all buildings in Mississippis six southernmost counties. Many people are still living in shelters and it will be months, or even years, before things return to normal.

Mississippi had become a gambling powerhouse with 13 casinos lining the coast before the storms, but the hurricane picked up many of the floating barges and threw them on shore.

The state legislature this week agreed to allow land-based casinos, meaning companies can spend their insurance settlements on newer, and potentially bigger buildings.

"The destruction is so enormous, people can redevelop differently and hopefully a lot better," said Stephen Richer, director of the Gulf Coast Visitors and Convention bureau.

The silver lining of the hurricane is the chance to rebuild with a masterplan, said Alan Feldman, spokesman for MGM Mirage (Research), operator of the Beau Rivage casino resort in Biloxi.

Those plans will include moving most of the areas coastal casinos off of barges and as far as 800 feet inland. MGM itself expects to repair its barge, which was damaged by the storm, but not destroyed.

Harrahs Entertainment Inc. (Research) which had casinos in Gulfport and Biloxi, said it is considering building a single, larger facility in Biloxi.

Before the hurricane, the regions popularity was on the upswing.

"People really like coming here for both short and long-term stays," said Richer, citing the regions water sports, museums, golfing, restaurants and shopping.

The state is already the third largest gambling destination in the United States after Nevada and New Jersey. Gambling revenue in Mississippi, including casinos north of the coast along the Mississippi River, totaled nearly $3 billion last year.

"With the redevelopment, we are going to see a much higher quality of end-product," Schostak said.

The Gulf Coast is likely to follow the lead of Las Vegas, which has been very successful at diversifying its original gambling draw to become a destination offering a range of entertainment options, he said.

Most visitors to the Gulf Coast live within a 250-mile radius and come by car, Schostak said. But Richer said about a quarter of Gulf Coast visitors travel 750 miles or more.

"We were becoming a pretty significant national destination," he said.

Atlantic City, New Jersey, has similar goals and has been building shopping, dining and other attractions, in contrast to smaller destinations that offer little beyond slot machine floors.

There were also 40 to 70 condominium projects under development along the Mississippi Gulf Coast before Katrina, a few of which were already open, the visitors bureau director said.

The casinos and other tourism operations remain dependent on the rebuilding of infrastructure like roads and bridges. "It will all happen in phases, but its a southern region, so work can go on year-round," Schostak said.

Mississippi Governor Haley Barbour has already assigned contracts for road construction and set up a recovery task force.

Insurance proceeds are expected to fund much of the rebuilding, but there are already disputes over coverage.

Pinnacle Entertainment Inc. (Research), operator of the now-destroyed Casino Magic property in Biloxi, last week said its primary insurer believed damage caused by Katrina resulted from flooding rather than weather, a classification which would let the insurer pay less.

Schostak said gaming companies had already poured tens of millions of dollars into the region in past years.

"This isnt the first hurricane that hit the Gulf Coast and it wont be the last," he said.

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